04/10/2011 EMMA UCHE

*** Proposes N4.8tr Budget for 2012.

ABUJA, October 04, (THEWILL) – The Presidency has finally phased out the highly contentious fuel subsidy beginning from the 2012 fiscal year.

Also, the federal government has made a budget proposal of N4.8trillion for the 2012 fiscal year based on crude oil bench mark of 75$ per barrel. In the same vein, the government said it would also freeze all overheads allocations till 2015.

These were the high points of the 2012 to 2015 Medium-Term Fiscal Framework as well as the 2012 Fiscal Strategy Paper forwarded to the National Assembly by President Goodluck Jonathan on Tuesday.

The framework was prepared by the Federal Ministry of Finance.

He said the major component of the policy of the fiscal consolidation is government’s intent to phase out the fuel subsidy beginning from the 2012 fiscal year.

“This will free up about N1.2trillion in savings, part of which can be deployed into providing safety nets for poor segments of the society to ameliorate the effects of the subsidy removal,” Jonathan wrote.

President Jonathan further stated that the accrual to the Sovereign Wealth Fund (SWF) as a result of the withdrawal of the fuel subsidy will also augment funds for critical infrastructure through the infrastructure window of the SWF.

The proposed budget however, is anchored on deficit of 2.69percent of GDP in 2012, which is expected to follow a declining and sustainable path.

 This he said is within the threshold indicated by the Federation Reserve Account (FRA), 2007 and more importantly implies that the deficit will be financeable as domestic borrowing will also follow a declining path over a period.

“The microeconomic benefits expected benefits expected to accrue from a reduction in the fiscal deficit include a reduction in the crowding out of private investors and a positive impact on interest rates.

On the freezing of overhead allocations, the President said the gain would be that capital spending will increase marginally from N1.32tr in 2012 to N1.64tr in 2015 as government intends to leverage on Public Private Partnership (PPP)- type arrangements to supplement capital allocations from the budget.

For recurrent expenditure, President Jonathan said in recent times, the outlay on recurrent spending has outstripped the growth of spending on capital projects. This increase he added can be attributed largely to the rising wage bill, an outcome of the increase awarded to civil servants, medical personnel and ASUU staff among others.

The 2012-2015 period according to him will focus on correcting this structural imbalance in the nation’s expenditure profile thus ensuring that more funds are allocated to critical infrastructure projects.

“The report of the Expenditure Review Committee, which concluded its work in April 2011, will provide a starting point for this key initiative. PPP funding for infrastructure projects will also be pursued aggressively. The share of the recurrent spending in aggregate expenditure is set to decline from 74.4percent in 2011 to 72.5percent in 2012 while capital expenditure as a share of aggregate spending is set to increase from 25.6percent 2011 to 27.5percent in 2012”, he stated.

However, the President premised the reason for adopting four year capital budget planning on the fact that the focus is the completion and exit from the portfolio of ongoing capital projects and programs which are being re-prioritized in line with the developmental objectives of the Fiscal National Implementation Plan of the Nigeria 20:2020.


“Capital budget allocation will reflect government priorities and there will need to be serious trade-offs in order to ensure flagship projects in key sectors of the economy are adequately funded,” he said.

Source: The Will